2018 New Year Oration

Zhang Ruimin -- 2018 New Year Oration.

A New Year Is Just A Number.

A New Self Is What It Takes To Bring In A New Sun!

By Zhang Ruimin

January 1, 2018

The Common Era year-numbering system counts the years by adding one to an accumulated number with each passing year, but in the end it is just a number. Using this method of timekeeping, each of us appears to have had more and more time to ourselves, but doesn't it also mean that we will have less and less time left to us?

A new year always brings people wonderful hopes for the future. In my opinion, what people are really looking forward to is the newness, rather than the year itself. Thus, the ancient Chinese sexagenary cycle for year-numbering is more apt for a philosophical discussion. Heaven, earth, and man are blended together with the four seasons in an ever-repeating cycle, without a beginning nor an end. In awe of nature as manifested in time and space, people in ancient times were also restrained and rational, constantly endeavoring to grasp nature's patterns and laws and seeking to transform the world accordingly.

The same is true for businesses. Verticality and linearity are deep-rooted DNAs of traditional management in the West. Driven by the business objective of maximizing the shareholder value and by principal–agent incentives, businesses are in an endless pursuit of upscaling until the day they can no longer grow. Ultimately, no business can escape the fate of sliding downhill after their prime years have passed. Entrepreneurialism, as manifested by social Darwinism and disruptive innovation, has contributed to the ever-shortening average lifespan of Fortune 500 companies. As a cultural DNA, atomism became increasingly ingrained in the Western civilization with each of the three Industrial Revolutions and the miraculous achievements they brought about. By the time the Internet and its succeeding major economic activity, the Internet of Things, arrived, that once powerful cultural DNA has turned into a culprit of rigid thinking and paralyzed organization. Based on Newtonian mechanics, classical physics has guided us in our effort to understand a part of the universe. But it has also opened up even more blank space for quantum physics to examine. In the quantum era, holism from Eastern cultures is rekindling and shedding new light in the night sky of science and philosophy. In fact, holism has always been there and never been quenched.

Companies, hierarchically built from the steel and cement of bureaucracy, are destined to fade away. Organizations, a human community of common values and purposes, are composed to resound for eternity.

A closed-up business empire will either perish or wait for far-from-equilibrium self-organization to happen and topple it forcibly and irreversibly. As a product of the Industrial Revolution era, companies are increasingly a thing of the past, burying with them the once unbreakable pyramid of hierarchy and the power of control derived from a vertical and linear structure. Ultimately, companies will vanish into the ashes and dust of history, just like the Arabian merchants with their camel caravans traveling along the ancient Silk Road.

While the human race dominates the Earth today, no single person – neither you nor I – can rule the world. Only by organizing can people become the most powerful animals on this planet. While companies will die eventually, organizations will survive if they are self-organized in line with the theory of dissipative structures. While brands will ultimately fade away, ecosystems will sustain if they are communities where all stakeholders co-create and win together.

In an interconnected world, you and I and every product we make are just another node in a wider network. Once becoming a node, you – and only you – are at the center of yourself. Once connected to and enabled by the Internet of Things, products shed their original functional value and become a vehicle for services and solutions. Nodes added to a network amplify the network effect. Nodes removed from a network do not affect its operation.

How do we shift from deriving value from products to co-creating value in a win-win ecosystem? This is a transition that all companies will have to face and struggle to achieve. The obstacle lying between the two kinds of value-creation and value-delivery networks is not a physical or institutional divide but one even harder to surpass. It is a monster in our minds, a mirror reflecting our past successes, and a fog of confusion resulting from two centuries of atomist and linear management. The Rendanheyi model based on the user multiplier theory is our only way out.

Rendanheyi is one of the world's first management models to explore ways to build a community economy fit for the Internet of Things. Rather than thinking that Haier has invented Rendanheyi, I'd like to think that Rendanheyi has chosen Haier. Its emergence is based on three firm beliefs: in "people first" as a core value, in a value-creation and value-delivery system for win-win co-creation, and in a self-critical attitude as a cultural DNA fostering innovation and entrepreneurship. In this sense, both Rendanheyi and Haier are a gift and a choice by our time; both Haier and Rendanheyi represent an awakening and celebration of humanity.

It remains to be seen how the Internet of Things era will leave its mark on the history of human evolution. But one thing is clear: in this era, companies must become ecosystems, organizations must become self-organized, and management must aim to achieve Rendanheyi, aligning individual entrepreneurs’ goals with their users’ needs. Ecosystems, self-organization, and the Rendanheyi model must also keep evolving to stay alive. As ancient Greek philosopher Heraclitus pointed out, fire is the origin of all things – "an everliving fire, kindling in measures and being quenched in measures." By the same token, ancient Chinese philosopher Zhuangzi also wrote about how fire passes on even though firewood burns out. While a company will eventually burn out, an ecosystem can become an everliving fire. Microenterprises form and dissolve, but the entrepreneurial spirit will pass on across the ecosystem.

In the era of traditional management, I wrote an essay titled "Haier as a Sea" to discuss open-minded and eclectic approaches to business.

In the Internet era, I wrote another essay titled "Haier as a Cloud" to encourage entrepreneurship and interconnectedness.

In the Internet of Things era, I hope Haier will become an everlasting fire, integrated into every user's and every entrepreneur's life, and passing on from generation to generation.

Humankind discovered fire so that our ancestors could embark on a journey of greatness. By emulating fire, the Haier model can lead the world's business enterprises on a new journey to explore the Internet of Things era.

The sun is new each day. A new year is just a number. A new self is what it takes to bring in a new sun.

To Haier entrepreneurs across the world: I wish you a Happy New Year and I hope you will make a new progress every day!